Experts warn businesses not to over-buy on unlimited data plans

Unlimited data plans, like the one announced this week by Verizon, are mostly irrelevant to large businesses that negotiate lower prices with carriers for large pools of data, voice and text for hundreds of workers.

But smaller businesses -- say, those with fewer than 50 workers -- could benefit from an unlimited plan, especially if they don't have an assigned telecom manager who manages wireless contracts.

"Smaller organizations that don't have the staff or capacity to manage their mobility budgets could benefit" from an unlimited plan, said Michael Nziolek, vice president of strategic consulting at Tangoe, a telecom expense management consultancy.

But there's a caveat: Unlimited plans can lead a company to overspend, he said. Buying an unlimited plan for a higher price might be unnecessary compared to a lower price, for example, 4GB of data per month per employee -- especially when 4GB is all a particular employee really needs.

"Unlimited is over-buying in most cases," Nziolek said, based on Tangoe's consulting work with many companies, including large firms and many mid-sized companies with fewer than 500 employees. "With unlimited, you're often paying paying more than you should."

Roger Entner, an analyst at Recon Analytics, agreed.

"Americans really like unlimited plans and are typically overbuying when going for it," Entner said. "Overbuying means that based on their usage pattern, they could have purchased a metered plan for less money that comfortably fits their needs. But they would rather have unlimited to be safe. Just like everything else in life, a large majority of Americans think they are above average."

In the case of the new Verizon Unlimited plan, a single customer pays $80 a month for unlimited data, talk and text, HD video streaming and mobile hotspot. That price goes down in steps to $45 per month for four lines.

A Verizon spokeswoman said via email that the new plan is available to small businesses with up to 50 workers.

Verizon said its heaviest users of the unlimited plan -- those who exceed 22GB of data in a month -- will be forced to wait behind other customers in the event of network congestion.

Nziolek said at $45 a month per line, Verizon's unlimited plan sounds attractive -- until a customer includes the cost of buying a new phone that is required in the plan. For an iPhone 7 in the plan, that device cost is $650, or $27 a month.

The Verizon Unlimited service cost of $45 plus the device cost of $27 equals a total monthly total of $72.

"That's not terribly compelling," Nziolke said. By comparison, large companies can negotiate pricing that is less than 40% or better of that Verizon Unlimited monthly cost, made possible because of the large contracts those customers sign, he said.

"If my company were small and didn't have the staff to manage wireless accounts, a $45 monthly unlimited plan that included a device subsidy would be eye-opening, but at $72 for a device and monthly access, that's not really a compelling price for a company," Nziolke said.

Large enterprise customers typically work with either AT&T or Verizon in the U.S. for wireless service contracts that cover hundreds or even thousands of employees. AT&T said its unlimited plan is currently unavailable to business customers and is now for consumers on wireless plans who also have a DirecTV or U-verse subscription.

Sprint provides unlimited data plans for small businesses, while T-Mobile said all business customers will have access to unlimited data and other new features as of this Friday. However, both carriers are far smaller than AT&T and Verizon in the wireless market for business.

T-Mobile has spurred interest in unlimited data plans and forced other carriers to follow suit, but it has not won as many business customers as it could have, he added. That's because businesses that Nziolek have consulted with have voiced concerns about T-Mobile's network coverage outside of the big cities where the carrier's networks are strongest.

"T-Mobile has been very aggressive on prices and strong in metro centers, but has fragmented coverage outside the metros," he said. "If you have a sales force that has to travel point to point, we've had customers who have seen their traveling sales teams struggle."

Nziolek said he's confident that Verizon can handle the burden of unlimited customers sapping network capacity with HD video viewing and other heavy data uses. "Verizon's network won't bog down," he said. "If Verizon experiences any congestion problems, they will adjust the device threshold of that 22GB throttle."

Eventually, Nziolek said he believes smartphones will become far more expensive and users will upgrade them more frequently than now. That trend, in turn, will cause Verizon and other carriers to drop completely out of offering device subsidies for enterprises -- leaving business customers to help employees buy their phones on their own entirely or join with customer smartphone buying consortiums for better deals.

"When the day comes that a company can't get a device subsidy, then the $45 monthly unlimited plan could be more compelling," he said.

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